MATH10951 - 2011/2012
- Title: Financial Mathematics for Actuarial Science I
- Unit code: MATH10951
- Credits: 10
- Prerequisites: None
- Co-requisite units: None
- This course unit may only be taken by students on the Actuarial Science and Mathematics degree programme
- School responsible: Mathematics
- Members of staff responsible: Dr. Yumashev
Provide an introduction to simple financial transactions as used in actuarial science and the mathematics involved.
Brief Description of the unit
This unit explores various simple financial topics from a mathematical point of view.
On successful completion of this module students will be able to
- Retain knowledge and demonstrate understanding of the topics in this course unit. In particular :
To understand the differences between simple and compound interest and between the force of interest and the nominal rate of interest.
To be familiar with the terms involved in a general cashflow model and how these apply to other simple financial schemes.
- Carry out routine calculations involving the topics in this course
unit. In particular :
To carry out calculations involving loans and other transactions taking into account different definitions of the interest rate, interest applied on various time-scales and situations where discount rather than interest applies.
- Have the basic knowledge and a set of tools and methods that
can be used
· in subsequent course units,
· (together with MATH20951) to gain exemption from the Actuarial Profession CT1 examination,
· In a career involving mathematical and/or actuarial topics.
Future topics requiring this course unit
MATH20951, MATH20962, MATH39522.
- Brief reminder of underlying mathematics. Geometric Series and Sum, derivatives and integrals, Maclaurin Series for exponential.
- Brief introduction to role of finance in actuarial science
- Generalised cashflow model. Inflow and outflow. Examples of simple models
- Simple and compound interest and discount. The time value of money
- Interest Rates. The force of interest and nominal rate of interest. Compound interest applied at various time intervals
- Real and Money interest rates
- The value of a cashflow at a given time
- Nomenclature for compound interest functions as applied to annuities certain, deferred annuities and varying annuities
- Equations of Value
- Loan Schedules. Calculating Repayments. Flat Rates and APRs
- Core Reading : Subject CT1, Financial Mathematics. Produced by the Actuarial Profession
- JJ McCutcheon and WF Scott, An Introduction to the Mathematics of Finance, Heinemann, 1986
Teaching and learning methods
Two lectures and one examples class each week.
- Two coursework assignments; Weighting within unit 10% each
- Two hour end of semester examination; Weighting within unit 80%